China 2012 growth to slow to 8.2pc, recover in 2013

Published: 22 May 2012 4:28 PM

PARIS, May 22 — Chinese growth is likely to slow to 8.2 per cent this year, its weakest in more than a decade, before government support helps it rebound to 9.3 per cent in 2013, the Organisation for Economic Co-operation and Development (OECD) said today.

The OECD cut its growth forecast for the world’s second-largest economy from 8.5 per cent made last November. That is still higher than a government target of 7.5 per cent for 2012.

“As the inventory cycle turns, and fiscal and monetary policy become more expansionary, growth should pick up in the course of 2012 and stabilise at over 9 per cent in 2013,” the Paris-based body said in its biannual outlook.

Increased policy support and an expected recovery in the global economy could lead to a rebound in activity in China in the second half of 2012, it said.

The OECD said the government, which has signalled a willingness to take action to halt the slowdown, was likely to step up investment in key infrastructure projects if growth weakened in the current quarter.

Data for April, including factory output and fixed-asset investment, suggests growth has weakened from the first quarter, when it hit a three-year low of 8.1 per cent in annual terms.

The OECD expects the central bank to ease policy further and boost bank credit for first-time home buyers and sound property developers, which could help stabilise the property market.

The People’s Bank of China has cut the amount of cash banks must hold as reserves three times since November to crank up lending. Analysts polled by Reuters expect further cuts in reserve requirements and more fiscal measures to support the economy.

Full-year annual inflation is expected to fall to 3.3 per cent in 2012 from 5.5 per cent last year, the OECD said. Inflation could fall further 2.9 per cent in 2013.

The OECD projected China’s current-account surplus as a per centage of gross domestic product would fall to 2.3 per cent in 2012 and 1.7 per cent in 2013.

Meanwhile, China could forge ahead with financial reforms to free up bank lending and deposit rates and allow more private investment in the banking sector, theOECD said.

“Capital outflows should be liberalised with appropriate sequencing so as to help create a more balanced two-way market for renminbi (yuan),” it said. — Reuters

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